Read on the Trading Floor - 09 April 2024

Today’s focus… Gold, CPI, JPY and much more

Macro Themes At Play

Theme 1 - Inflation eve

Theme 2 - CB previews to pass the time

Theme 3 - Got Gold?

Theme 4 - Market vs BoJ Stand off

Further reading and listening of note

Theme 1 - Inflation eve

Another quiet session, with the majority of markets in a holding pattern as investors remain cautious, patiently waiting for fresh impetus from tomorrow's US CPI. Will core remain at 0.4%? Will 10s break 4.5%? Will fixed income offer something more than stocks? Will the Fed's window to cut rates before the Autumn election close shut? 

• ING - FX Daily: Dollar awaiting bullish catalyst

• MacroVisor - Breakfast Bites - US CPI Preview

• Saxo Bank - US CPI lower than expected CPI may prove insufficient to stem yield surge

• The Next Economy - Second Wave or Bump in the Road?

• Bloomberg - Bond Traders See 4.5% Yields as Next Test as Focus Shifts to CPI

• Real Vision - Will Inflation Bring Out the Fed Hawks?

• Steno Research - The week at a glance: US CPI to surprise hawkishly paired with a surprise rate cut?

• Brent Donnelly am/FX - CPI biased to weak

Theme 2 - CB previews to pass the time

If hotter CPI is a concern in the US, the market is looking for signals elsewhere that CB's are ready to cut rates in Q2 as growth disappoints in Europe, Canada and further afield.... FT - Central banks lower the bar for rate cuts

BoC

• ING - Why the BoC could open the door to a June rate cut

• Livesquawk - BOC’S MACKLEM COULD BE READY TO PREP MARKETS FOR A SUMMER CUT

• BMO - Continental Divide

ECB

• ING - April’s ECB Cheat Sheet: Eyes on the target

• Saxo Markets - Data-driven until June, Fed-dependent thereafter.

• Nordea - ECB Watch: We like June more than April

RBNZ

• Westpac - Preview of RBNZ Monetary Policy Review, April 2024

• Livesquawk - RBNZ’s Focus Remains On Forward Guidance

Theme 3 - Got Gold?

Another ATH for the shinny brick that is single handily keeping CB execution traders, Desk Strategists and FinTwit commentators entertained. Explanations for the divergence of Gold and US real yields (Chart 1 source BofA) are landing firmly a the door of major CB's. 

Source: BofA 

The broader commodity index (led by copper now at a 15month high) is being helped by the Chinese/US/German manufacturing turning higher, EV roll out, inflation hedge, wars (Ukraine vs Russia) and proxy wars (Israel vs Iran)... the reasons are a plenty, price action is engrossing as commodities offer momentum that is lacking in FX, Equities and Fixed Income markets. 

Rising copper/oil prices = higher food prices = higher rates of inflation = higher yields... It's too early for CB's to declare victory on inflation?

Source BNYM

• Steno Research - GOING GLOBAL AND REAL!

• Bloomberg - Food Prices Are Up Under Biden, Like Every Other President

• FT - Global oil market likely to be ‘extremely tight’, says Citadel

• The Macro Trading Floor - The Next Big Trade?

• Steno Research - Energy Cable: Melt UP in commodities upcoming?

• ING - The Commodities Feed: Another record for gold

• BNYM - What's Causing The Rise In US Yields?

Theme 4 - Market vs BoJ Stand off

Like a spaghetti western, the market sits under 152.00, as the verbal jaw boning is sufficient to slow the ascent. Higher CPI and we will spike, as fixed yields test 4.50% in US 10s that's when we'll see where the BoJ/MoF interest comes... The positioning in short JPY/ long carry is BIG, even if they sell USD, the market feels comfortable that it wont hold the sell off for long. JPY only gains when the Fed enters their cutting cycle which looks later and later in 2024. 

• Bloomberg - BOJ's Kazuo Ueda Embarks on Second Year as Governor With Next Hike In Focus

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